What Will Collision Insurance Cover In The Event Of An Accident?

What will collision insurance cover in the event of an accident?

In this article, you’ll learn about:

what collision insurance covers in the event of an accident
what collision insurance is
what it covers
when you should drop it
collision vs comprehensive coverage
do you need it if your car is paid off
do you need it for an older car

Let’s dig in.

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What Will Collision Insurance Cover In The Event Of An Accident?

Collision insurance covers damages to your vehicle caused by an accident with another vehicle or object, regardless of who is at fault.

Here’s what collision insurance covers in the event of an accident:

Repair Costs: Collision insurance pays for the repair of damages to your vehicle up to its actual cash value. The actual cash value is the car’s worth at the time of the accident, not what you originally paid for it. If repair costs exceed the car’s actual cash value, the car is considered “totaled.”
Replacement Cost: If your vehicle is deemed a total loss after an accident, collision coverage can pay for a replacement vehicle. The payout amount typically represents the car’s actual cash value minus your deductible.
Damage from Different Types of Collisions: This coverage isn’t limited to accidents with other vehicles. It can also cover damages if you collide with stationary objects like a tree, pole, or guardrail.
Rollovers: If your car flips or rolls over during an accident, collision insurance may cover the damage.
Deductible: In most policies, there is a deductible, which is the amount you have to pay out of pocket before your insurance begins to cover costs. For instance, if you have a $500 deductible and $2,000 in repair costs, you’d pay the first $500, and your insurance would cover the remaining $1,500.

It’s worth noting what collision insurance does not typically cover:

Medical expenses: Any injury to you or your passengers would typically be covered under personal injury protection (PIP) or medical payments coverage, depending on your location and policy.
Other people’s property or vehicle: Damage to other people’s property or their vehicle is usually covered under the liability portion of your auto insurance.
Natural disasters, theft, or vandalism: These are typically covered under comprehensive insurance, a separate part of your auto insurance policy.

Always review your specific insurance policy and discuss it with your insurance agent.

This will help you understand the full range of what’s covered and any exclusions or limitations.

What Is Collision Insurance?

Collision insurance covers the cost to repair or replace your car if it’s damaged in an accident with another vehicle or object.

It focuses on your vehicle, not others.

If you hit a car or a tree, collision insurance helps pay for repairs.

There’s usually a deductible, which you pay first.

After that, the insurance pays the rest up to the car’s current value.

It’s optional unless a lender requires it for a car loan or lease.

Is Collision Insurance Required By Law?

Collision insurance is not required by law.

However, lenders or leasing companies may require it if you have a loan or lease on your vehicle.

It covers damage to your own car in an accident.

Always check with your state’s insurance regulations and your lender’s requirements.

When To Drop Collision Insurance

You won’t always need collision insurance coverage in the event of an accident.

Here are scenarios when it could make sense to drop collision insurance:

Vehicle’s Age: Drop collision when your car is older and its value has significantly decreased.
Cost Comparison: If yearly collision premiums and your deductible combined exceed the car’s value, consider dropping it.
Savings: If you have enough savings to cover the car’s replacement or repair costs, you might not need collision.
Driving Habits: If you drive rarely and are at low risk for accidents, it may not be worth keeping.
Vehicle’s Condition: If your car is in poor condition, paying for collision might not make sense.
Loan Requirements: Keep collision if your loan or lease requires it.

Comprehensive vs. Collision Insurance

Let’s look at a simplified version of comprehensive vs. collision insurance.

Comprehensive Insurance:

Covers damage to your car from non-collision events.
Examples: theft, vandalism, natural disasters, fire, and animal strikes.
It’s optional unless required by a loan or lease.

Collision Insurance:

Covers damage to your car from collisions with other vehicles or objects.
Examples: hitting another car, tree, or light pole.
It’s optional unless required by a loan or lease.

To summarize this more:

Collision covers crashes.
Comprehensive covers “everything else.”

FAQs About What Collision Insurance Covers In An Accident

Here are other questions that our clients ask us about collision insurance.

Do I Need Collision Insurance If My Car Is Paid Off?

No, you are not required to have collision insurance if your car is paid off.

If your car is paid off, collision insurance is optional.

It’s not required by law.

However, consider a few things:

Collision insurance covers repairs to your car after an accident.
If your car is older, the cost of insurance might exceed its value.
Without collision coverage, you’ll pay out-of-pocket for any damages.
Assess the value of your car and your ability to cover repairs to decide.

Deciding to keep or drop collision insurance depends on your financial situation and comfort level with risk.

Should I Have Collision Insurance On A 10-Year-Old Car?

Here are things to consider when deciding if you should have collision insurance on a 10-year-old car:

Car’s Value: Cars lose value as they age. Check your car’s current worth using Kelley Blue Book, NADA, or a dealer. If its value is low, the insurance payout may not be worth the premium.
Repair Costs: Older cars can get damaged easily due to fewer safety features. However, their repairs might be cheaper because of the used parts availability.
Premium Costs: Compare your premium to the potential payout. Subtract your deductible from your car’s value. If the premium is a large part of your car’s value, consider dropping the coverage.
Deductible: A high deductible close to your car’s value means you might get little money after an accident.
Financial Situation: Ask yourself: if your car is totaled, can you pay for a replacement without insurance? If no, you might need the coverage.
Driving Habits: If you rarely drive or stick to safe areas, consider dropping the coverage. If you’re often in risky areas, keep it.
Loans or Leases: If you owe money on your car or lease it, you might need to keep the insurance.
Peace of Mind: Some keep the insurance simply for peace of mind, even if it’s not cost-effective.

Is Collision Insurance Worth It?

Here are things to consider to determine if collision insurance is worth it for you:

Car’s Value: High-value cars benefit from collision insurance. Older cars with low value might not justify the insurance cost.
Loan or Lease: Lenders or leasing companies often require collision insurance to protect their investments.
Financial Situation: Can’t afford repairs after an accident? Collision insurance offers a safety net.
Deductible: A high deductible lowers your premium. However, if it’s too high, insurance might not be beneficial, especially for small damages.
Risk Profile: Driving habits and locations influence your collision insurance need. Driving in high-traffic areas increases accident risk.
Premium Cost vs. Benefit: Compare the annual premium to your car’s value. If the cost nears the car’s worth, it may not be cost-effective.
Driving Record: Multiple past accidents suggest you might need collision insurance.
Peace of Mind: Beyond finances, some value the assurance of coverage in case of accidents.

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What Will Collision Insurance Cover In The Event Of An Accident?

Table of Contents

The Hive Law Has Been Featured In

Get A FREE Consultation!

What Will Collision Insurance Cover In The Event Of An Accident?

What Is Collision Insurance?

Is Collision Insurance Required By Law?

When To Drop Collision Insurance

Comprehensive vs. Collision Insurance

FAQs About What Collision Insurance Covers In An Accident

Do I Need Collision Insurance If My Car Is Paid Off?

Should I Have Collision Insurance On A 10-Year-Old Car?

Is Collision Insurance Worth It?

Get A FREE Consultation!

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